Multiple choice

The profits of last three years are Rs. 42,000, Rs. 39,000 and Rs. 45,000. Capital employed is Rs. 4,00,000 and normal rate of return is 10%. The amount of goodwill calculated on the basis of super profit method for three years of purchase will be

  1. Rs. 2,000

  2. Rs. 4,000

  3. Rs. 6,000

  4. Rs. 8,000
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Average profit = (Rs. 42,000 + Rs. 39,000 + Rs. 45,000) ÷ 3 = Rs. 42,000. Normal profit on capital employed = Rs. 4,00,000 × 10% = Rs. 40,000. Super profit = Rs. 42,000 - Rs. 40,000 = Rs. 2,000. Goodwill (3 years purchase) = Rs. 2,000 × 3 = Rs. 6,000.

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